Disruption is not only about technology

08 Sep 16 Disruption is not only about technology

When we hear terms like “disruption” of industries or economies, it invariably conjures up images of technology driven innovators. Google and Facebook have altered the face of advertising. Youtube is threatening television, while Uber has changed personal transportation forever. Amazon has destroyed parts of traditional retailing, and whatsapp is up-ending telecom business models. Solar power will (hopefully) make fossil fuels redundant.

The list goes on, but always with a technology flavour. Invariably, it is technology that creates the platform for new, disruptive business models. Over time, air travel, biotechnology, GM seeds or digital photos were tech-driven disruptions.

To start with Baba Ramdev built a huge fan following around the themes of yoga, health and “swadeshi”.

These ardent supporters were the early adopters of medicinal and FMCG products, and allowed Patanjali to experiment with a wide range of products.

These devotees became unpaid marketers, driven by an almost evangelical faith in the Baba, and his mission towards healthy living. They propagate the brand because they believe in it. Way better than paid employees could ever do! These initial referrals helped spread the word to family, friends, neighbours and especially the younger generation.

Distribution (especially in India) is critical. Getting shelf space is tough, and incumbent FMCG companies have substantial bargaining power. What did Patanjali do? They “empowered” a significant number (~10,000) of their fans to become dealers/franchisees. This helped Patanjali reach customers across India, bypassing traditional distribution channels, and enabling cheaper prices. Better still, the shopkeepers truly believe in the values of Baba Ramdev and Patanjali.

This captive dealer network has also allowed Patanjali to test reaction to new products.

Traditional FMCG companies are cautious, launching and building new product categories in a slow, focused manner – taking time to understand and master new markets. However, Patanjali has defied conventional wisdom, and unleashed a veritable shower of products – literally hundreds, across almost every conceivable FMCG category. More are in the pipeline! Even small shares in so many markets leads to big bucks.

All product sell under a single brand, so more buck for brand-building expenses.

Today, the brand is so huge that mainstream retailers want to get onto the Patanjali bandwagon. Some are even ready to have separate sections dedicated to Patanjali! Not even Hindustan Unilever has that kind of pull.

Reports suggest that Patanjali’s revenues crossed Rs 50 billion last year, making them amongst the top 10 FMCG players in India – already! All the others have a 50+ year vintage.

In a business where brand and distribution take decades to build in a large, diverse market like India – Patanjali’s growth resembles that of an e-commerce company.

Every disruptor rides on a trend or a discontinuity. Here, healthy living, associated with natural and traditional products is a huge trend, not only in India, but globally. Whether Patanjali has just ridden the trend, or helped convert it into a tidal wave is the question.

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Arun Jethmalani

Arun is one of the founders of ValueNotes. Apart from trying to build a high-quality research business, he has spent the last 27 years researching, analyzing, and dissecting companies and industries. He has worked with clients of all shapes and sizes, from all parts of the world – in providing them insights that make a difference to their business.
Prior to ValueNotes, he was an equity analyst/advisor, and wrote extensively on investing – including a column titled “Value for Money” which ran for 10 years in the Sunday edition of the Economic Times. To this day, he remains an avid “value” investor.
He has also been published in several other publications, and is a regular speaker at events related to technology, investing, competitive intelligence, business process management, Internet, etc. See: Valuenotes Events
He has been instrumental in developing a community of research and intelligence professionals in India, and is the founder and current chairman of the SCIP (India) Chapter.
Arun holds a B Tech from IIT, Bombay and an MS from Duke University, NC, USA.
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medico mart

Thanks to share with us .Patanjali rise is impressive but it has created totally new customer base not conventional one.
So,there will be no threat to brands like Colgate or Unilever because conventional customers prefer chemical products over Ayurveda..such a great article to share this information…..thanks again…

bhagwat v gore

First of all, Patanjali is brand in Ayurveda as BP/SHELL in oil or GM/HYUNDAI in automotive. People always think about brand before anything in cosmetic industry. Patanjali only have adverse effect on business like dabur (brands in herbal sector).
As technology is concerned, Patanjali itself a leader in research and development in herbal and organic sector.

Patanjali rise is impressive but it has created totally new customer base not conventional one.

So,there will be no threat to brands like Colgate or Unilever because conventional customers prefer chemical products over Ayurveda..